Islamic finance revisited: conceptual and analytical issues from the perspective of conventional economics
After a brief recent empirical sketch of Islamic finance, the paper turns to its main theoretical and conceptual purpose. It seeks to relate the concepts of Islamic and conventional finance, and to examine certain important questions which arise from the interaction between these systems. The paper is written from the perspective of conventional modern economics, as the authors are students of the latter. The paper discusses the main tenets of Islamic finance, as well as those of modern economics, including the implications of zero interest rates and those of Modigliani and Miller theorems. The most notable finding of this paper is that John Maynard Keynes’ analysis of employment, interest and money provides, inadvertently, the best rationale for some of the basic precepts of Islamic finance. The paper concludes that there is no inevitable conflict between the two systems and cooperation between them is eminently desirable and feasible.
|Date of creation:||14 Nov 2011|
|Date of revision:||10 Apr 2012|
|Publication status:||Published in Cambridge University CBR Working Paper Working Paper 430.2012(2012): pp. 1-35|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
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- Beck, Thorsten & Demirguc-Kunt, Asli & Merrouche, Ouarda, 2010.
"Islamic vs. conventional banking : business model, efficiency and stability,"
Policy Research Working Paper Series
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- Timur Kuran, 2011. "The Long Divergence: How Islamic Law Held Back the Middle East," Economics Books, Princeton University Press, edition 1, number 9273.
- Mirakhor, Abbas & Krichene, Noureddine, 2009. "The Recent Crisis: Lessons for Islamic Finance," MPRA Paper 56022, University Library of Munich, Germany.
- Jared Rubin, 2011. "Institutions, the Rise of Commerce and the Persistence of Laws: Interest Restrictions in Islam and Christianity," Economic Journal, Royal Economic Society, vol. 121(557), pages 1310-1339, December.
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